AGL 5.60 Decreased By ▼ -0.18 (-3.11%)
ANL 8.90 Increased By ▲ 0.02 (0.23%)
AVN 76.85 Decreased By ▼ -2.07 (-2.62%)
BOP 5.26 Decreased By ▼ -0.02 (-0.38%)
CNERGY 4.63 Decreased By ▼ -0.07 (-1.49%)
EFERT 81.27 Decreased By ▼ -0.33 (-0.4%)
EPCL 50.08 Decreased By ▼ -0.83 (-1.63%)
FCCL 13.16 Decreased By ▼ -0.22 (-1.64%)
FFL 5.69 Decreased By ▼ -0.03 (-0.52%)
FLYNG 7.07 Decreased By ▼ -0.08 (-1.12%)
FNEL 4.79 Decreased By ▼ -0.03 (-0.62%)
GGGL 8.80 Decreased By ▼ -0.10 (-1.12%)
GGL 14.55 Decreased By ▼ -1.33 (-8.38%)
HUMNL 5.69 Decreased By ▼ -0.08 (-1.39%)
KEL 2.63 Decreased By ▼ -0.03 (-1.13%)
LOTCHEM 28.60 Decreased By ▼ -0.45 (-1.55%)
MLCF 24.49 Decreased By ▼ -0.61 (-2.43%)
OGDC 72.43 Decreased By ▼ -0.02 (-0.03%)
PAEL 15.36 Increased By ▲ 0.01 (0.07%)
PIBTL 5.00 Decreased By ▼ -0.05 (-0.99%)
PRL 16.10 Decreased By ▼ -0.19 (-1.17%)
SILK 1.08 Decreased By ▼ -0.01 (-0.92%)
TELE 9.14 Decreased By ▼ -0.23 (-2.45%)
TPL 7.23 Decreased By ▼ -0.10 (-1.36%)
TPLP 18.61 Decreased By ▼ -0.34 (-1.79%)
TREET 21.68 Decreased By ▼ -0.32 (-1.45%)
TRG 136.71 Decreased By ▼ -4.44 (-3.15%)
UNITY 16.88 Decreased By ▼ -0.14 (-0.82%)
WAVES 9.86 Decreased By ▼ -0.04 (-0.4%)
WTL 1.41 No Change ▼ 0.00 (0%)
BR100 4,225 Decreased By -29.6 (-0.7%)
BR30 15,518 Decreased By -214.7 (-1.36%)
KSE100 42,150 Decreased By -243.4 (-0.57%)
KSE30 15,588 Decreased By -75.7 (-0.48%)
Follow us

The blowback from the economy being in disarray on key industrial sectors is beginning to reveal itself. Long steel manufacturers producing billets and rebars estimated that FY23 will bring a contraction of 15-20 percent in demand. In the first quarter of the fiscal year, demand is down by much more and it is reflecting in the numbers.

Amreli Steel (PSX: ASTL) saw volumes reduce by 43 percent in 1QFY23 after the company had to suspend operations for the month of September having its inventories piling up and find it difficult to rid of the stockpiles. The massive devastation caused by floods has dramatically slumped an already sluggish construction demand. Amreli’s revenues during the period declined 17 percent; higher prices during the period helped shore up the revenues where revenue per ton sold increase nearly 45 percent.

Falling scrap prices in the international markets has been the saving grace for local rebar manufacturers though rupee depreciation did take away some of the benefit that could have been accrued from it. Costs per ton sold for Amreli rose 42 percent during 1QFY23 year on year, slightly lower than the revenue which led to the company’s gross margin improvement.

Players like Agha Steel (PSX: AGHA) or Mughal Steel (PSX: MUGHAL) have not been as lucky, though Agha Steel kept margins close to last year’s 23 percent, and substantially higher than its peers. The real shocker for Agha Steel’s financial statement were its overheads and finance costs that ballooned due to the steep policy rate of 15 percent.

In 1QFY23, where Amreli’s finance costs (as a share of revenue) stood at 9 percent versus 1QFY22’s 3 percent; Agha’s climbed to 15 percent from 7 percent last year. Cumulatively, finance costs, other charges and overheads were 19 percent of revenues for Agha during the quarter (1QFY22: 11%) wiping away the gross margins it achieved during the quarter. For Amreli, these expenses rose to 14 percent versus 7 percent of revenue this period last year. Agha’s earnings were given a leg up by “other income” that stood at 44 percent of its before-tax earnings. Though the effective tax was lower than last year, the earnings drop of an average 72 percent between the two companies is depressing.

Surprisingly, according to the Pakistan Bureau of Statistics (PBS), during the Jul-Sep period, production of steel billets and ingots was 4 percent higher than last year but the financial statements of listed steel manufacturers show a visible decline in sales. There is always ungraded steel that is being produced and sold in the market by smaller mills while larger mills have stocks piling up waiting for demand to catch up. The Pakistan Association of Large Steel Producers (PALSP) believes about half of the steel being sold in the market is ungraded or not up to the standard which affects the quality of buildings and infrastructure projects. Needless to say, at a time when construction cost is near prohibitive, builders and developers would cut corners by opting for cheaper quality materials at a discount and save themselves from cost overruns.

It is clear that with no rehabilitation for floods in sight, and cuts in development spending, the demand for construction is precious for steel makers and hard to come by.


Comments are closed.

No rebar rebound

PTI to quit Punjab, KP assemblies this month: Imran Khan

Three police personnel gunned down in Nowshera

US condemns attack on Pakistani embassy in Kabul, calls for probe

Moonis’ claims on Gen Bajwa raises doubts on institution’s apolitical narrative: Sanaullah

Dutch masters into World Cup quarter-finals as USA downed

OPEC+ will keep oil policy unchanged in review talks: sources

PTI quitting provincial assemblies will be humiliating for its voters: Saad Rafiq

Russia: price cap is ‘dangerous’ and will not curb demand for our oil

Pakistan calls on interim Afghan govt to up security at Kabul embassy after attack

US unveils high-tech B-21 stealth bomber